A Menu of Livestock Sector Policies

Rationale and Structure

Ugo Pica-Ciamarra
FAO Pro-Poor Livestock Policy Initiative (PPLPI)

Background document for the FAO Informal Expert Meeting on

‘Designing Effective Country Specific Strategies for Dairy Development’
Bangkok, Thailand, 17-20 November, 2008

1. The Issue
The livestock sector has for long been considered an appendage to agriculture:
scattered and incoherent public interventions have characterized the sector – with a
focus on animal breeding, health and feeding – and few countries, if any, have
designed and implemented comprehensive livestock sector development policies
and associated strategies. However, over the last decade or so, following a growing
appreciation of the increased contribution of livestock to agricultural growth and
poverty reduction, a number of developing country governments have formulated
livestock sector development policies and strategies, while the international
community has also shown increased commitment towards supporting the
development of the sector.
Designing and implementing effective livestock sector policies and strategies is
repeatedly proving a daunting task, both because of limited information, capacity
and resources of livestock sector policy makers, and because the development of
the sector depends on the broader agricultural and macroeconomic policy
framework that is beyond the scope and responsibility of the Livestock Department.
The prevailing policy thrust in developing countries, however, provides livestock
policy makers with unprecedented opportunities to address developmental
constraints both within and outside the livestock sector, as witnessed by several new
and innovative interventions in the livestock sector which many developing country
governments are experimenting with.
The Livestock Sector Policy Menu identifies and systematises some conventional and
innovative policy instruments available to policy makers to promote a sustainable
and equitable development of the livestock sector, including a brief description,
their pros and cons, and a country example.

2. Designing effective livestock sector policies and strategiesi

Several developing country governments in Asia, Africa and Latin America – often
backed by the international community – have been designing more or less
comprehensive livestock sector policies and strategies, such as in Bangladesh (2007),
Chhattisgarh, India (2008), Gabon (2008), Indonesia (2000), Malawi (1995), Mali
(2003), Mauritania (2002), Orissa, India (2002), Peru (2006), Tanzania (2002), and
Zambia (2004).
Livestock sector development policies / strategies are usually impressive technical
documents. They are however built on two strong assumptions: the first is that
livestock policy makers have complete knowledge of all the constraints in the sector;
the second is that livestock policy makers have the capacity to entirely remove the
identified distortions, which entails the adoption of policy instruments both within and
outside the livestock domain, such as: ‘Micro-finance packages better tailored to
the production cycles of various livestock species’ (Livestock Development Strategy
of an Asian country).
Whilst the implementation of a well-designed livestock development policy / strategy
will bring some good as all constraints are simultaneously removed, the chances that
the strategy is perfectly formulated and successfully implemented appear small.
What happens in practice is that, among the many interventions envisaged in the
development strategy, the Livestock Department goes for those which seem to be
technically feasible, stay within the budget constraint, and are politically doable.
This approach is very pragmatic, and at least something is done. The big problem is
that such piecemeal approach is faulty in its economic logic as there is no
guarantee that any partial reform taken on its own will contribute to the
development of the livestock sector – in the worst circumstances it may even be
welfare-reducing – because all other constraints remain binding. Assume that policy
makers formulate a two-pronged livestock sector development strategy, including
the provision of animal vaccines to villagers and paving feeder roads. The Livestock
Department manages to vaccinate the entire livestock herd in the villages but is
unable to have the Ministry of Public Works pave the roads. As a result, the
increased production of animal source food ends up in local markets, prices drop,
and the livestock keepers are eventually worse-off.
The (likely) impossibility of fully implementing wholesale reforms calls for different,
more practical approaches. One could be to assess all the subsidiary interactions of
the envisaged public actions and then only select that or those which have the
largest welfare-enhancing effect. The difficulty with this strategy is that many, if not
most of the secondary interactions are hard to identify and quantify ex-ante, and
they are typically figured out only ex-post.ii In the vaccine-feeder road example, for
instance, it could be difficult to conclude ex-ante that lower food prices in local
markets may lead to reduced malnutrition, and that the overall benefits for
consumers will outweigh the income loss suffered by the livestock keepers.
Since wholesale livestock reforms are practically impossible and partial reforms entail
secondary effects which cannot figured out ex-ante and may ultimately be welfare-
reducing, some other way to implement livestock sector strategies needs to be
envisaged. Livestock sector policy makers may wish to go for those public actions
which have the largest direct impact on a specific target group, so that the biggest
bang from the policy shift is produced and the chance of secondary welfare-
reducing interactions is greatly reduced. This requires that livestock sector policy and
strategy (i) be centred around the various actors along the livestock supply chain,
with an understanding of the role of livestock in their livelihoods, rather than around
the farm animal; (ii) the envisaged interventions be not simply listed, but ranked
according to their direct impact on defined target groups. Partial equilibrium
models and cost-benefit analysis are standard tools for ex-ante assessment of the
direct impacts of specific interventions.iii
The proposed approach appears appealing as, on the one hand, it requires
developing a long-term development strategy for the sector – which is critical for
budgetary planning and allows consistency with the broader agricultural and policy
framework – and, on the other, it allows to target interventions which enhance
political consensus as, when livestock production systems are far below their
potential, even moderate movements in the right direction suffice to produce a big
growth payoff. An issue with this approach could be that some, if not the majority of

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the identified constraints / instruments are beyond the scope and responsibility of
livestock sector policy makers, including macroeconomic and agricultural
bottlenecks. In the vaccine-feeder road example, paving the feeder road could
end up being the intervention with the largest positive impact on the livestock
keepers, but the Livestock Department has neither the responsibility nor the capacity
to pave rural roads. The prevailing policy thrust in developing countries, however,
provides livestock policy makers with unprecedented opportunities to address
developmental constraints both within and outside the livestock sector.

3. A menu of livestock sector policies

There are three elements which these days support effective livestock policy and
strategy making. The first two are exogenous to the livestock domain: improved and
sound macroeconomic fundamentals in much of the developing world constitute a
critical underpinning to the efficacy of livestock sector policies; the increased
adoption by governments of national and sector-wide approaches allows the
livestock sector to be systematically integrated into broader poverty reduction and
agricultural development policies and strategies. The third relates to the process of
economic liberalization, privatization and fiscal austerity, which characterizes a large
majority of developing countries. Such policy shift has barely reduced the degrees
of freedom of livestock policy makers; on the contrary, it has created unmatched
opportunities to formulate and implement effective livestock sector policies and
strategies.
In a market-based economy the government should supply public goods and ignite
innovations and changes when markets are imperfect and/or produce socially
undesirable outcomes. The government thus retains the freedom to step in markets
for both efficiency and equity reasons and, depending on the circumstances, can
intervene indirectly or indirectly: for instance, it can disseminate information; regulate
market access; provide one-off incentives to some key market actors and then step
out; directly supply private goods when alternative instruments prove ineffective.
For the Livestock Department, which typically manages a comparatively small
budget and has limited capacity to allure the Minister of Finance, a market based
approach to livestock policy and strategy making is promising. (i) The Department is
expected to spend its resources largely on the supply of public goods, thereby
getting rid of the ineffective spray-gun approach which frequently characterizes
government-driven livestock programmes. (ii) A share of the budget, including extra-
budgetary resources, could be allocated to design and promote market-based
interventions, which can have far-reaching effects on the growth of the livestock
sector. They in fact require that the government triggers the development of
livestock-related markets and then steps out – such as providing the private sector
with a one-off grant to establish cattle dipping tanks, which can then survive on user
fees – and do not entail continuous government spending, which is most likely
unfeasible and inefficient because of both budget constraints and red tape and rent
seeking activities. (iii) As far as the market mechanisms are respected, there are no
pre-determined boundaries to the interventions of livestock policy makers, who thus
have a first time opportunity to address the most binding constraints to livestock
sector development, rather than forcibly focusing on animal health, animal breeding
and other livestock-related services.
Whilst the principles underpinning market-based policy instruments are
straightforward, there is no unique correspondence between the functions that the

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government should perform and the way they have to be performed. Market-based
principles can be in fact packaged into a variety of institutional designs, i.e. a
multiplicity of policy instruments could be potentially used to address just one
developmental constraint. The Livestock Sector Policy Menu represents an attempt
to identify and review some of the conventional and innovative policy instruments –
including a brief description, their pros and cons, and a country example – available
to livestock sector policy makers in the land / water / feed / insurance / animal
health and other services / finance / marketing / research / environmental
protection and trade domains. It is then up to policy makers to select and adapt the
most appropriate instrument or set of instruments to promote the development of the
livestock sector in their respective countries.
The Menu shows, for instance, that in the domain of animal health different policy
instruments have been tried out in different countries to enhance the quality and
coverage of animal health services, such as cost-recovery mechanisms in
Zimbabwe; combined animal-human health services in Chad; distribution of input
vouchers to livestock keepers in Romania; provision of grants to veterinarians to
establish animal health clinics in rural areas in India; support to organizations which
supply livestock services to their members in Kenya; sub-contracting private
veterinarians in Mali; institutionalization of community animal health workers in
Indonesia and several other countries.iv Some experimentation, driven both by the
private and public sector, is also on-going in non-livestock markets. For instance,
whilst livestock policy makers are not responsible for regulating micro-credit in rural
areas, they can urge financial institutions to explore ways to accept farm animals as
collateral for small loans (Uganda) or make use of non-bank agents to deliver
financial services to some livestock-dependent communities (Brazil); whilst they are
not responsible for the national research policy, they can set up competitive
research funds (Uganda) or matching grants (Malaysia) to promote livestock
research in a given domain; while livestock policy makers are not responsible to build
roads, they can support the establishment of periodic livestock markets (Kenya) or
facilitate marketing contracts along the supply chain (Pakistan) to facilitate market
access; while they will never be responsible for the broader environmental and trade
policy framework, they can promote sustainable land co-management experiments
(Tanzania) and contribute to the establishment of export facilities (Djibouti).
Note that livestock sector policy makers are not promoting changes in the overall
policy framework of say the credit and research domain, but within the broader
livestock development policy and strategy, they seek to crowd in investment and
entrepreneurship in those markets whose development is likely to contribute the
largest to livestock sector growth. In any case, they remain primarily responsible for
the supply of public goods and market-driven interventions in the three major
livestock domains, namely animal health, breeding and feeding.

4. Conclusions
Comprehensive livestock sector policies and strategies are critical to build a vision
about sector development, create political consensus, and identify broad areas of
interventions. Despite being technically sound, however, they could hardly ever be
successfully implemented because of financial, human, informational and
administrative limitations of the government. Rather than going after too many
targets all at once in the hope that some will be hit, it is thus suggested that livestock
sector development strategies identify priority areas of interventions according to the
magnitude of their direct impact on selected target groups. Many of the envisaged

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interventions will be livestock-related and under direct responsibility of the Livestock
Department, while some will not pertain to the livestock domain. But the market
paradigm which today dominates the policy scenario in much of the development
world allows livestock policy makers to design and experiment with policy instruments
which crowd in investment and entrepreneurship both within and outside the
livestock domain. The Pro-Poor Livestock Sector Policy Menu is an attempt to
identify and describe those instruments which can be used by policy makers to
promote the functioning of markets in a variety of livestock-related domains,
including land / water / feed / insurance / animal health and other services / finance
/ marketing / research / environmental protection and trade.
The proposed approach requires significant changes in the ways livestock sector
policies and strategies are designed. First, livestock stakeholders along the value
chain and not the farm animal should be at the centre of the livestock policy and
strategy; second, since some of the interventions will not pertain to the livestock
domain, livestock policies should not be exclusively designed by technical staff in
livestock department but a certain degree of inter-disciplinarily is called for; finally, a
certain amount of policy experimentation must be accepted, as only some goods
will be directly supplied by the Livestock Department and the success of market-
based interventions is uneven and unpredictable, depending on the response of the
private sector to policy actions.

i This section elaborates on Rodrik D., A. Velasco, R. Hausmann (2008) Growth Diagnostics. In
N. Serra, J. Stiglitz, The Washington Consensus Reconsidered. Towards a New Global
Governance. Oxford University Press.
ii Some interesting efforts to combine micro and macro data to ex-ante assess the impact of

policy changes in the livestock sector have been recently attempted. See Otte J., D. Roland-
Holst, S. Kazybayeva, I.Maltsoglou (2005) Integrated Poverty Assessment of Livestock
Promotion: The Case of Viet Nam. PPLPI Research Report, May 2005, FAO, Rome; Roland-Holst
D., J. Otte (2007) Livestock and Livelihoods: Development Goals and Indicators Applied to
Senegal. African Journal of Agricultural Research, 2(6): 240-251.
iii A general review of traditional methods to assess interventions in livestock systems is Rusthon

J. (2003) Methods of Assessment of Livestock Development Interventions in Smallholder

Livestock Systems. PPLPI Working Paper No.3, FAO, Rome.
iv For a detailed review of animal health policy options see Pica-Ciamarra U., J. Otte (2008)

Animal Health Policies in Developing Countries – A Review of Options. PPLPI Research Report,
08-08, FAO, Rome.